The common stock of modern interiors has a beta of 1.61 and a standard deviation of 27.4 percent. the market rate of return is 13.2 percent and the risk-free rate is 4.8 percent. what is the cost of equity for this firm?
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Ответ:
18.324%
Explanation:
Given:
Beta = 1.61
Standard deviation = 27.4 percent
Market rate of return = 13.2 percent
Risk-free rate = 4.8 percent
Now,
cost of equity for the firm is calculated as:
Cost of equity
= Risk-free rate + Beta × (Market rate of return - Risk-free rate)
on substituting the respective values, we get
Cost of equity = 4.8% + 1.61 × ( 13.2% - 4.8% )
or
The cost of equity of the firm = 18.324%
Ответ: